Second Standing Committee
on Delegated Legislation

Monday 20 May 2002

[Mr. Peter Atkinson in the Chair]

4.30 pm

The Minister of State, Scotland Office (Mr. George Foulkes): I beg to move,

That the Committee has considered the draft Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) Order 2002.

The Chairman: With this it will be convenient to consider the draft Scotland Act 1998 (Modifications of Schedule 5) Order 2002.

Mr. Foulkes: I thank the Committee for agreeing to consider the two orders together. That is not only for the convenience of members of the Committee. In fact, it was suggested by Labour and Opposition Members that such action would be sensible. This is the third occasion on which I have addressed a Committee on orders under the Scotland Act. Right hon. and hon. Members will recall my practice on previous occasions of making available the notes on the orders that were prepared by the Executive for the guidance of members of the Scottish Parliament when they debated the orders.

Members of the Committee will note that they have been provided today with an explanatory memorandum, which was produced at Westminster. That is a new practice initiated by the Leader of the House, which took effect on 1 March. I hope that they will agree that that is a positive development. It is encouraging that best practice is shared by this place and the Scottish Parliament. We have things to learn from that new institution, just as it has from us. The adaptation for affirmative instruments at Westminster arises in large part from the comments of right hon. and hon. Members in previous debates on Scotland Act orders.

Before I turn to the content of the orders, I wish to remind members of the Committee why a Scotland Office Minister is leading the debate. The orders are principally constitutional in nature. The Scotland Act 1998 (Modifications of Schedule 5) Order is made under section 30(2) of the Scotland Act and concerns an amendment to an area reserved under schedule 5 of the Act. It will result in a change in the legislative competence of the Scottish Parliament. The Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) Order is made under section 63 of the Scotland Act and provides for Scottish Executive Ministers to exercise executive powers in areas where primary legislation continues to be a matter for this Parliament. It is commonly described as executive devolution.

Members of the Committee may care to note that Ministers in lead policy Departments have been fully involved in preparing both orders. The lead policy

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Department on section 30 is the Department for Transport, Local Government and the Regions and on section 63 it is the DTLR for the ferry aspect and the Department of Trade and Industry for the industrial development aspect.

I turn first to the draft Scotland Act 1988 (Modifications of Schedule 5) Order 2002. Schedule 5 of the Scotland Act forms part of the definition of the legislative competence of the Scottish Parliament, and sets out the matters that are reserved to this Parliament for the purposes of the Act. Section 30 of the Scotland Act provides a mechanism whereby schedule 4 or 5 of the Act can be modified by an Order in Council, subject to the approval of both Parliaments. That allows the boundaries of the Scottish Parliament's legislative competence to be adjusted, either by removing existing reservations in whole or in part, or by adding new ones. Until now, that has been in the one direction.

Members of the Committee may be familiar with the background to the order, which is enshrined in what is known as the McLeish settlement. That refers to assurances given to the House during the passage of the Scotland Act by Henry McLeish, the then Minister of State at the Scottish Office. Following devolution, railways became a matter reserved to the Westminster Parliament. However, commitments were made during the passage of the Scotland Bill in 1998 to devolve several powers relating to railways in Scotland. The McLeish settlement will ensure that Scottish Ministers have significant control over Scottish passenger rail services within the Great Britain framework. My hon. Friend the Member for Cunninghame, South (Mr. Donohoe), who is a member of the Transport Sub-Committee, knows that only too well.

Elements of the package have already been implemented by previous orders under the Scotland Act 1998. Those orders, among other measures, executively devolved to Scottish Ministers the administering of track access grants and grants to assist in the provision of facilities for freight haulage by rail, and responsibility for appointing the chairman of the Rail Passengers Committee Scotland. The orders also devolved funding powers and public expenditure provisions in respect of the Scottish passenger rail franchise framework. Provision was made for reports from the Rail Passengers Committees, the Rail Passengers Council, the Strategic Rail Authority and the rail regulator to be laid before the Scottish Parliament.

A further order under section 30 of the 1998 Act added exceptions to the rail transport reservation in schedule 5 of the 1998 Act. That amendment enables the Scottish Parliament to transfer to, or allocate among, new Scottish transport authorities the same rail responsibilities as those held by existing passenger transport executives or authorities. In practice, that means the same powers as those of Strathclyde Passenger Transport. If the Scottish Executive choose to set up a public authority or authorities, they will need to exercise those functions wholly, or mainly, in relation to transport.

Other elements of the McLeish settlement were implemented by the Transport Act 2000, which

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conferred on Scottish Ministers the responsibility for issuing directions and guidance to the SRA on the franchise operating passenger rail services that both start and end in Scotland, and for sleeper services run by that franchise within a national framework. It also gave Scottish Ministers the power to issue advice on cross-border services—in other words, those currently operated by Great North Eastern Railway, Virgin and Arriva Trains Northern.

Committee members will have read the explanatory memorandum, which explains in some detail the content of the Scotland Act 1998 (Modifications of Schedule 5) Order 2002. The order represents the completion of the McLeish settlement, and will amend section E2 of schedule 5 of the 1998 Act. It will transfer to the Scottish Parliament legislative competence over powers for the

''promotion and construction of railways''

in Scotland. Once the order is implemented, project promoters can apply to Scottish Parliament for permission to initiate projects. The order fulfils the McLeish settlement commitment of ensuring that promoters of railways, stations and maintenance depots can seek powers for proceeding with construction from Scottish Parliament.

Until now, all projects involving the construction of railways in Scotland have been scrutinised in Westminster, through the order-making procedures of either the Light Railways Acts 1896 and 1912, or the Private Legislation Procedure (Scotland) Act 1936. That is all before my time, and even the time of the Father of the House, my hon. Friend the Member for Linlithgow (Mr. Dalyell). In future, permission for railway projects that are wholly within Scotland will be granted at Holyrood, and cross-border developments will continue to be dealt with at Westminster.

Scottish projects that will be dealt with by private legislation in the Scottish Parliament will include both those concerned with heavy and light railways. Procedures for private Bills were updated and improved by Scottish Parliament in November 2000 and are now more streamlined. Powers for the development of heritage railways have traditionally been granted through light railway orders. Such orders will continue to be made, but by Scottish Ministers. Committee members are perhaps aware that several railway projects that will require legislation are currently being considered in Scotland. They include the link between Stirling and Alloa, which will please our beloved Whip, my hon. Friend the Member for Stirling (Mrs. McGuire). The order is being enacted in advance of any private Bill associated with the launch of the projects.

I shall mention rail safety briefly. Kenny MacAskill, a Scottish National party spokesman, said that only independence would guarantee no accidents on the railways. I have never heard such utter rubbish in all my life.

Mr. Ernie Ross (Dundee, West): Give them a chance to refute it.

Mr. Foulkes: If the SNP had been represented on the Committee—

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Mr. Ross: They are not present.

Mr. Greg Knight (East Yorkshire): The hon. Member for North Tayside (Pete Wishart) is a member of the Committee.

Mr. Foulkes: Ah, the SNP Whip, the hon. Member for North Tayside should be here. He is always chastising Labour Members for their inaction, but 13 Labour Members were present in the Room on time and are taking a close interest in what I say. There are even two Liberal Democrat Members present. However, no SNP Member has been sufficiently interested to come along.

Mr. Alan Reid (Argyll and Bute): Will the Minister note that the only Scottish Tory, the hon. Member for Galloway and Upper Nithsdale (Mr. Duncan), is a Committee member but has not bothered to turn up either?

Mr. Foulkes: I understand why the hon. Member for Argyll and Bute (Mr. Reid) wants that on the record, although I shall not go into further detail.

I turn to a matter that particularly concerns the hon. Gentleman: the draft Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc.) Order 2002. Section 63 of the Scotland Act 1998 provides a mechanism to allow functions of

''a Minister of the Crown in or as regards Scotland, to be exercisable by . . . Scottish Ministers instead of''

or

''concurrently with the Minister of the Crown''.

Committee members will have read the explanatory memorandum that sets out the order's content and implications in detail.

The order has been brought forward primarily as a result of great efforts by the Scotland Office and the Scottish and Northern Ireland Executives to establish ferry services between Ballycastle in Northern Ireland and Campbeltown in Kintyre. Several hon. Members—especially the hon. Member for Argyll and Bute—will be aware of the Scotland Office's positive and constructive role in the process, but I shall summarise it for the benefit of others and set out the context in which we are seeking consent to devolve powers to Scottish Ministers.

At the end of 1999, Sea Containers, which had run summer-only commercial operations on the route since 1997, encountered heavy losses and indicated that the service would not run in summer 2000. The service had been established to take advantage of the strong historical and cultural links between Kintyre and Antrim. It was also intended to build on the potential benefits to tourism of linking two neighbouring regions of outstanding natural beauty—they are almost as beautiful as Ayrshire, as hon. Members will know.

It was felt that the loss of the service would further affect both communities and their economies, which were already fragile. Additionally, Ballycastle and Campbeltown had newly built and publicly funded port facilities that were in danger of becoming permanently redundant.

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Any effective effort to address the situation had to involve both Scottish and Northern Ireland interests. The Scotland Office was in a unique position to co-ordinate a response with the backing of the Northern Ireland Office and the then Department of the Environment, Transport and the Regions. During the latter part of 1999 and the first half of 2000, extensive discussions were held with Sea Containers and other potential operators. It became clear that the service was not commercially viable and therefore required public subsidy to help to meet the operating costs.

After identifying that a service could operate only with a public subsidy, the next task was to investigate whether a subsidy could legally be paid. European single market legislation allows for public operating subsidy to be granted to maritime services only in specific circumstances. If a subsidy is intended to help provide a lifeline service or assist economic development in peripheral areas, a member state Government may declare a public service obligation for a ferry. On behalf of the Government, the Scotland Office made direct contact with the European Commission transport Directorate-General to find out whether a PSO could be declared.

Committee members may be aware that there is no formal approval mechanism for a PSO but merely an obligation on the Commission to investigate suspected infringement. It is therefore wise for anyone who wants to declare a PSO to check first with the European Commission. Following discussions and using evidence provided by consultants, Commission officials agreed informally at the beginning of 2001 that a ferry service would not infringe state aid legislation. That was a significant step forward achieved by the Scotland Office without which we would have been unable to proceed further.

We investigated simultaneously the potential benefits and costs of the service. The only effective way to test a market is to test it in reality. With the support of the two devolved Administrations, last May the Scotland Office formally sought initial, outline expressions of interest in tendering for the ferry service. We also commissioned an independent consultant to undertake an in-depth study into the potential benefits and costs of a new service. The study took some time to complete but was crucial in identifying the benefits that different service options, whether on the basis of six, nine or 11 months, might bring to the local economy and at what cost to the taxpayer.

Section E3 of schedule 5 of the Scotland Act reserves responsibility for financial support for shipping services that do not begin and end in Scotland. However, the uniquely peripheral area of the highlands and islands is such that the primary purpose of a new ferry service to Northern Ireland would always be to help economic development, rather than to be merely a commercial transport link. It was on that basis that the Northern Ireland and Scottish Executives had undertaken from the start of the process that any eventual subsidy would be found

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from within devolved sources. Nevertheless, although the money will come from devolved sources, it is from the Treasury, the Government and, ultimately, the taxpayer.

Scottish Ministers requested the order to allow to them to make payments directly to an operator of ferry services between the highlands and islands and Northern Ireland. In future, the Scottish Executive will be able to promote ferry services to Northern Ireland in supporting its economic development role in the highlands and islands. It will be for the devolved Administration to decide how to use the powers and run the appropriate tendering processes. I understand that an announcement will be made about that later this week.